GBP/USD. Analysis for October 25th. Patrick Harker sees no need to raise the Fed’s rate
October 25, 2023 5:25 pm
Regarding the GBP/USD pair, the wave analysis remains relatively straightforward and clear. The construction of a new downtrend segment continues, the first wave of which has taken on quite extensive form. In my view, there is no basis for the British pound to resume an upward trend, so I do not even consider such a scenario. The presumed wave 1 or a has been completed, although this conclusion is not as obvious for the British pound as it is for the euro. Wave 2 or b for the euro already has a three-wave structure, while for the pound, it doesn’t. A corrective wave can certainly be quite simple, but I still believe it should have at least a three-wave structure. However, a successful attempt to break through the level of 1.2120, which corresponds to 76.4% according to Fibonacci, will bring the instrument closer to the construction of wave 3 or c.
The internal wave structure of the first wave of the new trend segment looks complex, and it is difficult to identify five waves within it. However, five waves are visible in the case of the euro. If the global wave is completed for the euro, there is an 80% probability that it is also completed for the pound. But it’s not as clear with wave 2 or b. I believe that the correction may still develop despite the recent days’ decline.
The Fed maintains a moderately hawkish stance.
The GBP/USD currency pair fell by another 20 basis points on Wednesday. However, the decline of the British pound may already have come to an end today. The level of 1.2120 can easily push the instrument away again, and Jerome Powell’s evening speech may lead to a decrease in demand for the US currency, as it did last week. The situation regarding the Fed is not entirely clear at the moment. Several FOMC members have stated that there is no need for a new rate hike, but Powell has left open the possibility of one or two more if economic data disappoints. All indicators, except for inflation, are unlikely to disappoint the US regulator, but the consumer price index might. The US economy is growing at a good pace, which is a compelling reason to raise rates once again. I believe that the next tightening will occur in the future, but not in November. Most likely, it will happen in December.
At the same time, Patrick Harker, the president of the Federal Reserve Bank of Philadelphia, stated last week that he is not ready to support further tightening of monetary policy. Harker is not alone in the FOMC committee with this view. He believes that it is more reasonable at this time to keep the rate at its current level and closely monitor economic indicators. Perhaps his opinion is valid until December 2023, when the last Fed meeting is scheduled. If inflation continues to rise, the regulator will have no choice given a strong economy, a strong labor market, and low unemployment.
General Conclusions
The wave pattern for the GBP/USD instrument suggests a decline within the descending trend segment. The maximum the British pound can expect is the construction of wave 2 or b. But as we can see, there are significant problems even with the correction wave. At present, I would not recommend new sales, but I also do not recommend purchases because the corrective wave is currently quite weak. In any case, it is a correction wave. Sales will be possible with a successful attempt to break through 1.2120.
On a larger wave scale, the pattern is similar to the EUR/USD pair, but there are still some differences. The descending correction segment of the trend continues to take shape, and its first wave has already acquired an extensive form and is clearly unrelated to the previous upward segment.
The material has been provided by InstaForex Company – www.instaforex.com
Regarding the GBP/USD pair, the wave analysis remains relatively straightforward and clear. The construction of a new downtrend segment continues, the first wave of which has taken on quite extensive form. In my view, there is no basis for the British pound to resume an upward trend, so I do not even consider such a scenario. The presumed wave 1 or a has been completed, although this conclusion is not as obvious for the British pound as it is for the euro. Wave 2 or b for the euro already has a three-wave structure, while for the pound, it doesn’t. A corrective wave can certainly be quite simple, but I still believe it should have at least a three-wave structure. However, a successful attempt to break through the level of 1.2120, which corresponds to 76.4% according to Fibonacci, will bring the instrument closer to the construction of wave 3 or c.
The internal wave structure of the first wave of the new trend segment looks complex, and it is difficult to identify five waves within it. However, five waves are visible in the case of the euro. If the global wave is completed for the euro, there is an 80% probability that it is also completed for the pound. But it’s not as clear with wave 2 or b. I believe that the correction may still develop despite the recent days’ decline.
The Fed maintains a moderately hawkish stance.
The GBP/USD currency pair fell by another 20 basis points on Wednesday. However, the decline of the British pound may already have come to an end today. The level of 1.2120 can easily push the instrument away again, and Jerome Powell’s evening speech may lead to a decrease in demand for the US currency, as it did last week. The situation regarding the Fed is not entirely clear at the moment. Several FOMC members have stated that there is no need for a new rate hike, but Powell has left open the possibility of one or two more if economic data disappoints. All indicators, except for inflation, are unlikely to disappoint the US regulator, but the consumer price index might. The US economy is growing at a good pace, which is a compelling reason to raise rates once again. I believe that the next tightening will occur in the future, but not in November. Most likely, it will happen in December.
At the same time, Patrick Harker, the president of the Federal Reserve Bank of Philadelphia, stated last week that he is not ready to support further tightening of monetary policy. Harker is not alone in the FOMC committee with this view. He believes that it is more reasonable at this time to keep the rate at its current level and closely monitor economic indicators. Perhaps his opinion is valid until December 2023, when the last Fed meeting is scheduled. If inflation continues to rise, the regulator will have no choice given a strong economy, a strong labor market, and low unemployment.
General Conclusions
The wave pattern for the GBP/USD instrument suggests a decline within the descending trend segment. The maximum the British pound can expect is the construction of wave 2 or b. But as we can see, there are significant problems even with the correction wave. At present, I would not recommend new sales, but I also do not recommend purchases because the corrective wave is currently quite weak. In any case, it is a correction wave. Sales will be possible with a successful attempt to break through 1.2120.
On a larger wave scale, the pattern is similar to the EUR/USD pair, but there are still some differences. The descending correction segment of the trend continues to take shape, and its first wave has already acquired an extensive form and is clearly unrelated to the previous upward segment.
The material has been provided by InstaForex Company – www.instaforex.com
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